Executive Remuneration and Performance Measures in Mayne Pharma and CSL Limited

This article discusses the executive remuneration and performance measures used in Mayne Pharma and CSL Limited. It covers the details of the remuneration committee and membership, allocation of executive remuneration, mix of performance measures used, financial versus non-financial measures, and a summary of findings.

Running head: MANAGERIAL ACCOUNTING
Managerial Accounting
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Table of Contents
Company review:.......................................................................................................................2
Details of remuneration committee and membership:...........................................................2
Allocation of executive remuneration:...................................................................................3
Mix of performance measures used:......................................................................................4
Financial versus non-financial measures:..............................................................................6
Summary of findings:.................................................................................................................7
Conclusion:................................................................................................................................8
References:.................................................................................................................................9

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Company review:
Details of remuneration committee and membership:
After careful assessment of the annual reports of Mayne Pharma in 2017, no
evidences could be found about the members of the remuneration committee, while the
remuneration committee of CSL Limited consists of three non-independent directors. The
remuneration committee is responsible to evaluate and provide suggestions to the board
regarding the remuneration strategy of the entity while analysing conformance and efficiency
with pertinent standards (Wagenhofer, 2016). It has been identified that both entities conduct
timely meetings in a particular accounting year by taking into consideration external and
internal conditions. Additionally, independent consultants are used for obtaining professional
advice concerning executive remuneration and this is deemed to possess direct association
with the remuneration committee. Finally, it has been found that both organisations adhere to
“Corporations Act 2001” by seeking advices from the management consultants.
(Source: Maynepharma.com, 2018)

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(Source: Annualreports.com, 2018)
Allocation of executive remuneration:
Based on the remuneration reports of Mayne Pharma and CSL Limited, the executives
receive three types of remuneration, which are stated as follows:
Fixed remuneration:
In case of Mayne Pharma, fixed remuneration relies on the scope of executive role
and their individual knowledge, skill and experience. This is used as a yardstick against the
local and international competitors for attracting and retaining higher quality executives
(Chen, et al., 2016). In case of CSL, fixed remuneration includes base pay and
superannuation reviewed annually and benchmark is set against comparable peer entities.

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Short-term incentives (STI):
By using STI, it is possible for the participants to avail the opportunity of earning cash
as well as incentives related to deferred equity, in which particular outcomes could be
accomplished in the particular year (Fu, Carson and Simnett, 2015). In case of Mayne
Pharma, STIs rely on the results of the yearly corporate scorecard and individual performance
in opposition to knowledge performance indicators. In case of CSL Limited, annual STI
program is provided for aligning the executive interest with short-term operational and
financial targets for the year.
Long-term incentives (LTI):
In the words of Haque (2017), LTIs are reward systems developed for improving the
employee performance in long-term. This is done by giving rewards to the employees and
this does not have any direct association with the stock price of the organisation. For both
organisations, these systems are developed for aligning the executive as well as employee
performance with the shareholders’ interest. The market benchmarks, individual
performance, main skills and success potential help in setting the award amounts
(Wagenhofer, 2016).
Mix of performance measures used:
Various performance users could be used for analysing the financial health of the two
organisations in contrast to executive pay.
Financial measures:
In case of Mayne Pharma, the earnings per share of the organisation have increased
from 4.77 cents in 2016 to 6.18 cents in 2017, while the same has been $2.689 in 2016
compared to $2.937 in 2017. The main reason that earnings per share of both the

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organisations have increased over the year is the considerable rise in net income. This has
helped in maximising the wealth of the shareholders and accordingly, executive remuneration
has increased for both the organisations. However, for CSL Limited, the return on investment
has fallen from 26.8% in 2016 to 24.5% in 2017. On the other hand, for Mayne Pharma, the
return on capital invested has increased from 30% in 2016 to 32.60% in 2017 due to the fact
that the amount is utilised for generating adequate amounts from its unused asset base.
Therefore, in terms of performance measures, Mayne Pharma has conducted better
shareholder payout, since it has maximised both its earnings per share and return on invested
capital over the year.
Non-financial measure:
The non-financial measure used for assessing the performance of Mayne Pharma is
the balanced scorecard approach. However, this approach is not used by CSL Limited.
Hence, this method is applied for Mayne Pharma only, which is elucidated briefly as follows:
Financial perspective:
Mayne Pharma has the goal of minimising its business expenditures. This is
accomplished by enhancing productivity along with optimising business processes. For
accomplishing the same, the organisation has formulated a five-year plan and the process of
implementation is conducted in distinct steps. In addition, it is viewed to be involved in
higher return activities so that the total profit could be increased. Finally, the risks would be
reduced by shift over from net income to portfolio widening of fees associated with products
(Ireland, 2016). As a result, it would enable to provide protection to the organisation (Kent,
Kercher and Routledge, 2018).
Customer perspective:

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Mayne Pharma has developed a long-term plan for ensuring that adequate customers
are generated to arrive at positive financial performance. Moreover, it has set apart adequate
amount of funds in relation to research and development for obtaining considerable
knowledge regarding fulfilling the user needs in a better fashion (Safari, Cooper and
Dellaportas, 2016).
Internal processes perspective:
After the customer requirements are identified, Mayne Pharma is engaged in cross-
selling products due to the presence of proactive staffs. This is possible because of effective
interpersonal relationships maintained on the part of the staffs with the customers (Skovoroda
and Bruce, 2017).
Learning and growth perspective:
Balanced scorecard is utilised for providing excess motivation to the staffs so that
positive work outcomes could be assured. Moreover, the resources are allocated to the areas
having no potential of providing maximum gains.
Financial versus non-financial measures:
In terms of financial performance, the earnings per share and share price of Mayne
Pharma have been taken into consideration.

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According to the above figure, it is clearly inherent that the share price of the
organisation has been on the increasing scale and the current share price stands at $1.22.
However, fluctuations could be observed in the share price of the organisation from
September 2017 to September 2018. Despite such fluctuations, the organisation has managed
to increase its payments to the employees. After analysing the staff performance, Mayne
Pharma has provided certain benefits in the form of short-term incentives and long-term
incentives to its executive and non-executive members. This is because the resources are
motivated through incentives as well as allowances according to their contribution and
performance for accomplishing the goals and productivity developed within the organisation.
Summary of findings:
Based on the above discussion, it could be found that that Mayne Pharma and CSL
Limited conduct timely meetings in a particular accounting year by taking into consideration
external and internal conditions. Additionally, independent consultants are used for obtaining
professional advice concerning executive remuneration and this is deemed to possess direct
association with the remuneration committee. Finally, it has been found that both
organisations adhere to “Corporations Act 2001” by seeking advices from the management
consultants. In terms of performance measures, Mayne Pharma has conducted better
shareholder payout, since it has maximised both its earnings per share and return on invested
capital over the year.
Mayne Pharma has the goal of minimising its business expenditures. This is
accomplished by enhancing productivity along with optimising business processes. For
accomplishing the same, the organisation has formulated a five-year plan and the process of
implementation is conducted in distinct steps. In addition, it is viewed to be involved in
higher return activities so that the total profit could be increased.

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Conclusion:
Based on the above discussion, it could be stated that both Mayne Pharma and ASL
Limited have developed remuneration committees for reviewing and recommending the
executive compensation of the board committees. Accordingly, executive remuneration has
been carried out by using fixed remuneration, short-term incentives and long-term incentives.
However, in terms of financial performance in share market, Mayne Pharma is enjoying
competitive advantage over CSL Limited and thus, it has increased its executive
remuneration accordingly.

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References:
Annualreports.com., 2018. [online] Available at:
http://www.annualreports.com/HostedData/AnnualReports/PDF/ASX_CSL_2017.pdf
[Accessed 10 Sep. 2018].
Chen, L.H., Chung, H.H., Peters, G.F. and Wynn, J.P., 2016. Does Incentive-Based
Compensation for Chief Internal Auditors Impact Objectivity? An External Audit Risk
Perspective. Auditing: A Journal of Practice & Theory, 36(2), pp.21-43.
Fu, Y., Carson, E. and Simnett, R., 2015. Transparency report disclosure by Australian audit
firms and opportunities for research. Managerial Auditing Journal, 30(8/9), pp.870-910.
Haque, F., 2017. The effects of board characteristics and sustainable compensation policy on
carbon performance of UK firms. The British Accounting Review, 49(3), pp.347-364.
Ireland, I.N., 2016. Annual Report and Accounts for the Year Ended 31 March 2016. Invest
NI.
Kent, P., Kercher, K. and Routledge, J., 2018. Remuneration committees, shareholder dissent
on CEO pay and the CEO pay–performance link. Accounting & Finance, 58(2), pp.445-475.
Maynepharma.com., 2018. [online] Available at:
https://www.maynepharma.com/media/1964/2017-annual-report.pdf [Accessed 10 Sep.
2018].
Safari, M., Cooper, B.J. and Dellaportas, S., 2016. The influence of remuneration structures
on financial reporting quality: evidence from Australia. Australian Accounting Review, 26(1),
pp.66-75.

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Skovoroda, R. and Bruce, A., 2017. Shifting the goalposts? Analysing changes to
performance peer groups used to determine the remuneration of FTSE 100 CEOs. British
Journal of Management, 28(2), pp.265-279.
Wagenhofer, A., 2016. Exploiting regulatory changes for research in management
accounting. Management Accounting Research, 31, pp.112-117.